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£9 billion tax exemptions

14th April, 2005

Commercial aviation receives tax exemptions in the UK worth £9 billion pa!Commercial aviation (air transport) is generally recognised to be hugely under-taxed. A particular anomaly is the complete absence tax on fuel. If aircraft fuel were taxed at the same rate as petrol for cars, this would bring in over £9 billion to the Exchequer. This could be used to fund public services or to reduce taxation elsewhere in the economy.

It is, of course, a matter for debate as to whether aircraft should be taxed at the same rate as petrol. This in turn is part of the wider issue as to how motor traffic and air traffic should be taxed. But there is general agreement the aviation industry ought to be paying its fair share of taxes and that it ought to be paying for the costs it imposes on society – the ‘Polluter Pays Principle’. A tax on fuel is a simple ‘proxy’ for this.

For more on this issue see “The Hidden Cost of Flying“. This was written in 2003 before the government’s White Paper on aviation, but the issues and argument remain as valid as ever.